COVID 19 Budget Update May 13, 2020

State Budget Director Chris Kolb

Revenue Reductions

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• Treasury – March• $1 billion - $3 billion in FY20

• $1 billion - $4 billion in FY21

• UofM Research Seminar in Quantitative Economics (RSQE) – April • $2.6 billion in FY20

• $3.2 billion in FY21

FY 20 Combined GF and SAF Budget

3School Aid54%

Higher Education6%

Community Colleges2%

Health & Human Services20%

Corrections8%

State Police2%

Debt Service/SBA rent1%

All Other7%

Combined GF and SAF Budget: $24.7 Billion

Over 75% of the combined GF and School Aid Budgets go out to local governments, school districts, and external health providers.

FY 20 GF Budget

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Health & Human Services

45%

Corrections19%

Higher Education11%

State Police5%

Debt Service/SBA rent3%

All Other17%

Other Major GF Equivalent:Statutory Revenue Sharing - 5%Income Tax for Roads - 4%

$10.6 Billion General Fund: Over 80% of GF/GP appropriations are for health care, protecting vulnerable children and adults, public safety, and education.

COVID 19 Funds

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General Fund COVID 19 Appropriations

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• SB 151 and HB 4729:

• $50 million for health care capacity

• $50 million for flexible immediate response needs• Will be fully expended on 25% State Match of FEMA eligible expenditures

• $50 million additional upon transfer by the Appropriations committees

State Assistance to Health Care Providers

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New Funding Initiatives Gross Fed-Other Fed-CRF GF/GP

Cash Payments

Clinic Cash PaymentPayments totaling $5 million targeted to clinics that did not receive direct funding from the federal CARES Act. Clinic allocations based on number of visits with 'hot spot' factor adjustment.

5.0 0.0 0.0 5.0

CMH Cash PaymentPayments totaling $5 million targeted to Community Mental Health (CMH) agencies. Allocation formula accounts for population, COVID prevalence, disability prevalence, and other health metrics.

5.0 0.0 0.0 5.0

Hospital Cash PaymentPayments totaling $25 million distributed to Tier 1 hospitals in Wayne, Oakland, Macomb counties and Hurley Medical Center ($17M), rural hospitals ($4M) and all other hospitals ($4M). Payments within each pool allocated by bed count.

25.0 0.0 25.0 0.0

Rate Increases

Direct Care Wage Increase

DHHS Implemented a 3-month $2/hour wage increase for direct care workers within Medicaid behavioral health and long-term care programs (Medicaid Mental Health, MI Choice, ICO, and Adult Home Help) and workers providing services in substance use disorder services and applied behavioral analysis (ABA) services for autism.

76.6 53.8 0.0 22.8

Incentive Payments

Nursing Home COVID Hub PaymentsPayments totaling $5 million to nursing homes designated as regional COVID patient hubs. DHHS had initially identified 827 beds at 24 facilities to dedicate to COVID patients. Payments were intended to be $5,000-$6,000/bed but will ultimately depend on final number of approved beds.

5.0 0.0 0.0 5.0

Subtotal: New Funding Initiatives 116.6 53.8 25.0 37.8

State Assistance to Health Care Providers

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Budget Neutral Initiatives Gross Fed-Other QAAP GF/GPDelayed Tax and Settlement Collections

Clinic Delayed Recoupments Delayed collection of Medicaid-related settlements from FY16-FY19 where a clinic owes the state. 43.8 28.2 0.0 15.6

Nursing Home Provider Tax Deferral (April)Deferment of an estimated $27 million in nursing home provider taxes for the month of April. These taxes draw down federal Medicaid funds.

27.0 0.0 0.0 27.0

Nursing Home Provider Tax Deferral (May)Deferment of an estimated $27 million in nursing home provider taxes for the month of May. These taxes draw down federal Medicaid funds.

27.0 0.0 0.0 27.0

Hospital DSH Delayed RecoveryDeferment of $48 million in Disproportionate Share Hospital (DSH) recoveries related to the FY17 Step 2 reallocation process. Step 2 is normally a zero-sum redistribution of DSH payments. DHHS is continuing with the payment side of the redistribution but delaying collections.

48.0 31.3 16.7 0.0

Advanced Payments and Settlements

Clinic Expedited Settlements Accelerated payments of Medicaid-related settlements from FY16-FY19 where the state owes a clinic. 73.0 47.1 0.0 26.0

Hospital Expedited FFS Rural Access Payments

Advanced payment of the fee-for-service Rural Access Pool (RAP) targeted only to rural, critical access, and low-volume non-rural facilities. Note: $4.9 million was scheduled to be paid before intervention.

10.8 7.6 0.0 3.2

Hospital Expedited GF Rural Access Payments

Advanced payment of the GF-only Rural Access Pool (RAP) targeted only to rural, critical access, and low-volume non-rural facilities.

10.5 0.0 0.0 10.5

Hospital Expedited HRAAdvanced payment of the 2nd quarter Hospital Rate Adjustor (HRA) targeted only to rural, critical access, and low-volume non-rural facilities. Payments made to health plans to then pass to hospitals.

14.1 9.9 4.2 0.0

Nursing Home Gross AdjustmentGross adjustment of $15 million to artificially increase Medicaid payments to nursing homes. A future offsetting adjustment or cost settlement payment will eventually recoup these costs.

15.0 10.5 0.0 4.5

Subtotal: Budget Neutral Initiatives 269.2 134.6 20.9 113.7

Federal COVID 19 Funds - Health

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Health Care Relief Program - $175 billion nationwide direct payments to health providers.

• Current Allocations:• Medicare-based reimbursements - $50 billion

• COVID-19 High Impact Areas - $12 billion

• Rural and Critical Access Providers - $10 billion

• Medicaid-based reimbursements – TBD

• Allocation for the treatment of Uninsured – TBD

Federal COVID 19 Funds - FEMA

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FEMA Disaster Relief Funds:• Covers many direct state/local COVID 19 emergency expenditures

• Supplies - $238.1 million (State share $59.5 million)

• Personal protection equipment including masks, gloves, gowns, face shields, eyewear.

• Ventilators

• Testing Supplies

• Alternative Care Sites: TCF Center and Suburban Showplace – $96.5 million ($24.1 million)

• MDOC Quarantine - $8 million ($2 million)

• Food Banks Support - $14.5 million ($3.6 million)

• Requires 25% state/local match unless waived.

Federal COVID 19 Funds - CRF

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Coronavirus Relief Fund (CRF): Michigan Share = $3.9 billion• $800 million to local units with populations > 500,000:

• Detroit and Kent, Macomb, Oakland, and Wayne Counties

• $3.1 billion remaining to the state for expenditures that meet all of the following:• Necessary expenditures incurred because of the COVID-19 public health emergency;

• Costs not accounted for in the most recently approved state budget

• Costs incurred between March 1, 2020 and December 30, 2020.

• States have requested additional flexibility – specifically revenue backfill as an allowable use.

Federal COVID 19 Funds - CRF

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State CRF Expenditures to date:• Hospital Payments - $25 million

• State Employee COVID Premium Pay - $17 million per pay period

• $68 million estimated for 4 pay periods, through the end of the state of emergency

• $750 per pay period

• For first responder and health care workers continuing to work on site or with public and exempt from new federal leave benefits

• Approximately 14,500 employees eligible in MDOC, MSP, DNR, DMVA, and DHHS

• Evaluating other eligible expenditures

Elementary and Secondary School Emergency Relief Fund

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Fund NameMichigan’s Allocation

Recipients Distribution to Recipients

Elementary and Secondary School Emergency Relief

Fund

$389.8 million

Local educational agencies (including charter schools that are local educational

agencies)

• 90% of funding to districts based on the district’s share of statewide Title I (Part A) allocations

• 10% may be used for addressing issues related to COVID-19

Allowable Uses

Broad discretion including:• Any activity authorized by the ESEA, Support and Assistance Act, IDEA, Adult Education and Family Literacy Act, Perkins, or parts of McKinney-Vento.• Assistance to school resources for necessary resources to address needs in schools.• Activates addressing the needs of students in many categories include: at-risk, ELL, children with disabilities, and minorities.• Purchasing educational technology.• Other virus response activities including training, sanitation, meals, mental health, etc.

Higher Education Emergency Relief Fund

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Fund NameMichigan’s Allocation

Recipients Distribution to Recipients

Higher Education Emergency Relief Fund

$347.4 millionPublic and private

institutions of higher learning.

Grants distributed as follows:

• 90% to Institutions of Higher Education with 75% of this amount being based on Pell grant recipient rate and 25% based on non-Pell grant recipient rate.

• 7.5% based on proportionate share of other federal programs.

• 2.5% based on Title VII (Part B) of the Higher Education Act

Allowable Uses

• Funds may be used to cover any costs associated with significant changes to the delivery of instruction due to the coronavirus.

• 50% of funds must be used to provide emergency financial aid grants to students for expenses related to the disruption of campus operations due to coronavirus (food, housing, course materials, technology, health care, childcare, and other cost of attendance items)

Governor's Emergency Education Relief Fund

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Fund NameMichigan’s Allocation

Recipients Distribution to Recipients

Governor’s Education Emergency Relief

Fund$89.4 million

Local educational agencies (LEAs)

Institutions of higher education

Other education-related entities

Grants distributed as follows:

• To LEAs determined by the state educational agency to be most impacted

• To institutions of higher education the Governordetermines to be most impacted

• To other entities the Governor determines to be essential for carrying out emergency educational services.

Allowable Uses

• Activities that are necessary to continue to provide educational services to students and to support the on-going functionality of the local educational agencies.

• The provision of childcare and early childhood education, social and emotional support, and the protection of education-related jobs.

• Purposes allowed under the Elementary and Secondary School Emergency Relief Fund described previously

Child Care Relief Fund

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Fund NameMichigan’s Allocation

Recipients Distribution to Recipients

Child Care Relief Fund

$100.9 million(also assumes $30

million carry forward from existing Child Care Development

Fund)

• Licensed child carecenters

• Licensed child carefamily/group homes

• Licensed exempt providers

• Disaster relief child carecenters

• Tribal child care centers

Grants distributed as follows:

• Monthly payments made for April, May, and June.

•Grant amount is made up of a flat rate based on provider type, bonus payment if provider is open and caring for children of essential workers, star quality rating, and a per-staff stipend.

Allowable Uses

•Funds are very flexible and can be used to support a range of expenses, including, but not limited to: payroll, mortgages and rent, utilities, insurance, and supplies.

Federal COVID 19 Funds - Other

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Other Major Federal funding:• Transit –

• Urban grants (Direct payments) – $280 million

• NonUrban grants - $73 million

• Airport Support - $257 million

• Child Nutrition Programs - $214 million

• Coronavirus Testing (initial estimate) - $166 million

• Community Services Block Grants - $36 million

• Community Development Block Grants - $20 million State, $53 million local

• Older Americans nutrition and services - $33 million

• Emergency Solutions for homelessness - $17 million State, $20 million local

• Public Housing and rental assistance - $25 million

COVID Funding Reporting

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• COVID Federal Authorization – Weekly Reports

• Monthly detailed COVID expenditure reports

• Biweekly meetings with Appropriations Chairs

• COVID 19 Office of Accountability (Executive Directive 2020-5). Charged with:• Providing oversight of all spending to address the crisis;

• Reviewing the emergency procurement process and recommending to the governor, the state budget director, the director of the Department of Technology, Management, and Budget, and the director of the Michigan State Police any appropriate reforms to strengthen accountability; and

• Reviewing and monitoring the allocation of funds received by this state to ensure that uses of the funds are transparent to the public, and the public benefits of these funds are reported clearly, accurately, and in a timely manner.

Questions

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